PS3 Essay - T rue/False 1. False. Reason : A count ry can...

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True/False 1. False. Reason : A country can have a greater capacity to produce, but it may not have a comparative advantage. For example, US can produce more food than China or Mexico, but rather import food from them because it is not efficient to produce food and forego IT, services, etc. “If one country can produce a specific good at a lower opportunity cost than all other countries, then it has the comparative advantage in that item.” 2. True. Reason : If the country has deficient resources for an industry, the cost of producing good will be more expansive than other countries (meaning less competitive than other countries who are abundant in that deficient resource). Thus, by restricting imports, the industry can recover costs and be more competitive within the country.
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Recently, tire scrap trade between US and Mexico alerted environmentalists. The problem occurs due to ignorance toward externality cost of both US and Mexico. US government is not taking into account the externality cost, which is caused by circulating pollution. Since Mexico does
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This note was uploaded on 11/13/2009 for the course ECON 181 taught by Professor Kasa during the Spring '07 term at University of California, Berkeley.

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PS3 Essay - T rue/False 1. False. Reason : A count ry can...

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